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    1. Solving for Fixed Income

    Solving for Fixed Income

    Using Market Insights to achieve better outcomes

    Since 2004, J.P. Morgan Has Produced “Market Insights” To Help Individual Investors Understand And Make Their Way Through Rapidly Shifting Markets.

    Fixed Income has a vital role to play in diversifying portfolio returns, helping to preserve portfolio value against volatility and providing a reliable source of income.

    “Solving for Fixed Income” takes a look at how the current environment has affected fixed income’s role in a portfolio and at the many other opportunities that can accomplish its traditional objectives.



    1. LOW RETURNS FROM CASH


    Cash can be a real drag

    In the short term, having a little extra cash can be beneficial if you need to allocate quickly to new opportunities. However, cash is not always king when it comes to generating long-term returns.

    Even as central banks undertake the fastest rate hiking cycle in years, there is a debate on how high rates will go and whether they will beat inflation.

    Despite the uncertainty, the outlook for fixed income returns is the best it has been in many years.



    2. THE IMPORTANCE OF INCOME


    Maximize investment growth with bonds

    The total return on fixed income investments consists of two components; price, or capital, appreciation and coupon return.

    The steady stream of income earned from the coupons can offset the risk of price declines and serve a critical buffer for portfolios.

    The sharp rise in bond yields now means that this buffer is larger.



    3. MOVING BEYOND GOVERNMENT BONDS

     


    The search for higher yields

    Yields of government bonds may be the highest in several years, but yields are even higher across other sectors in the fixed income universe.

    Income seekers have an opportunity to pick up even higher rates of income by moving past government bonds and looking into the credit market or even emerging market bonds.



    4. GLOBAL INVESTMENT-GRADE BONDS

     


    The safety of high-quality credit

    Investment-grade bonds are the debt issued by companies that have a very low chance of default or represent a low credit risk.

    The risk is not zero and this means that investors can earn extra yield compared to a government bond. This spread between corporate and government debt represents another source of income for investors.



    5. HIGH YIELD BONDS


    Take advantage of higher yields

    Beyond investment-grade bonds are high yield bonds. This is debt issued by companies with slightly higher credit risk.

    However, investors can find themselves being compensated for this additional risk through additional yield.

    The price of high yield bonds can fall sharply if the economy moves into recession. Investors will have to be mindful of just how much exposure to high yield debt they have in a weak macro economic climate.



    6. DIVERSIFICATION AND FLEXIBILITY

     


    Why diversification works

    Fixed income investments diversify the risk from other assets in a portfolio. Bonds have a negative correlation to equities over time.

    This diversification principle applies within an asset class as well as between them.

    Including a wider array of fixed income instruments has yielded a better result than simply trying to pick the best one.

    Fixed income doesn’t mean investors have to be fixed in their allocation. Being dynamic to take advantage of a shifting economic environment or better pricing can be an attractive strategy.

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    The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions. 

    For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.

    This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

    J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

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    In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be. In Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only.

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